Investment Intermediaries Bill, 1995: Committee Stage.

Section 1 agreed to.
SECTION 2.

I move amendment No. 1:

In page 15, subsection (6) (e), line 16, to delete "79/627/EEC" and substitute "79/267/EEC".

This is a drafting amendment to ensure the correct directive is referred to. There was a printing error.

Amendment agreed to.
Section 2, as amended, agreed to.
Sections 3 to 8, inclusive, agreed to.
SECTION 9.

I move amendment No. 2:

In page 19, line 12, before "that person" to insert "or".

This is a drafting amendment.

Amendment agreed to.

I move amendment No. 3:

In page 19, between lines 13 and 14, to insert the following subsection:

"(2) For the purposes of this section, an investment business firm shall not be regarded as operating within the State, where it is a firm which has no branch within the State and where—

(a) its head or registered office is in a state other than a Member State, or

(b) its head or registered office is in a Member State outside the State, and it is a firm which does not provide any investment business services in respect of which it is required to be authorised in its home Member State for the purposes of Council Directive 93/22/EEC of 10 May 1993, or

(c) It is a firm which is authorised in a Member State outside the State, under Council Directive 93/22/EEC of 10 May 1993, but which provides investment business services of a kind for which authorisation under that Directive is not available, when it is providing such services,

unless it is providing investment business services or investment advice to individuals in the State who do not themselves provide one or more investment business services or investment advice on a professional basis.".

The purpose of this amendment is to provide for the many financial institutions, investment business firms and other companies in Ireland who currently have business relationships with a wide range of foreign banks and investment businesses. Where these foreign investment businesses are resident in the EU, they are generally required to be authorised in their home state under the Investment Services Directive or other relevant directives so that there is no doubt that they are entitled to do business with their Irish counterparts under their home state authorisations.

In the case of non-EU firms and certain EU firms doing business which is not covered by the Investment Services Directive, it is desirable that such firms will be able to continue to provide certain services to Irish firms. This is so as not to interfere with the normal range of business services in each direction in which Irish companies are engaged with companies in other countries. It is not desirable, however, that such firms should operate branches in the State or provide services to less sophisticated and potentially vulnerable individuals in the State without an authorisation from an Irish supervisory authority. For that reason, non-EU firms which have branches here or which provide services in any manner to non-professional individuals will not be exempted from being regarded as providing services within the State. In short, Irish firms and institutions will be able to continue to get investment services from abroad where they wish to do so.

I welcome this amendment but I would like some clarification on it from the Minister. If a company outside the member states of the EU is engaged in services here but does not have a branch located here, is it subject to the terms of this Bill because the EU directive applies only to those within the member states? I am confused about how it applies in the context of matters arising to which the Minister has already alluded. How will we deal with a company outside the EU which does not come under the terms of the investment directive?

If a company is providing advice to individuals here it will be subject to the full rigours of the Bill. If a bank or professional investment-type service is accustomed to dealing with, say, a Japanese bank for advice, that relationship will be allowed to continue. However, if that Japanese bank were purporting to give advice to individuals here, it would need authorisation to do that. There is two way traffic between professionals outside and within the country and we want to allow existing relationships to continue.

If a company outside the EU is providing advice on various topics to individuals or companies here, without having a branch or a representative located here, through the use of modern communications systems, will that company be subject to the terms of the Bill?

If such a company were offering advice and services to individuals here it would require an authorisation but if somebody is sending a faxed message to an individual in Ireland about which the State does not know, that would be difficult to police. The company would be in breach of the law in that case and if and when that was detected, it would be dealt with, accordingly.

Would the person or institution receiving the information break the law?

No. We are trying to protect people but if they do not wish to protect themselves, there is a limit to what we can do. The main purpose of this section is to allow existing relationships between banks and institutions within and outside the State to continue. However, if the institution outside the State, particularly in a non-EU country, were offering direct advice and services to individuals, that would not be legal and they would require authorisation for that. However, there is a problem in detecting that.

Does the same provision apply in other EU member states in dealing with this situation?

Yes, as far as I understand.

Amendment agreed to.
Section 9, as amended, agreed to.
SECTION 10.

Carlow-Kilkenny): Amendment No. 4 is in the name of the Minister. This amendment is consequential on amendment No. 5 and the proposal is that Nos. 4 and 5 be taken together. Agreed.

I move amendment No. 4:

In page 19, subsection (5) (a), line 48, and in page 20, line 1, to delete "in a country which is not a Member State" and substitute "outside the State".

The EU Investment Services Directive requires that firms operating in the EU must be supervised by their home state. For that reason, section 10 (5) (i) requires that to be authorised in Ireland an EU firm must have its head office in Ireland. However, some of the investment business services regulated under this Bill are not directly covered by the Investment Services Directive. An example is the provision of investment advice where the firm does not act on behalf of the client in any transaction. As the Bill stands the EU firm providing services here which are not covered by the Bill would have to set up its head office and registered offices here in order to get authorisation. It was felt this would be going too far. Amendment No. 4, therefore, ensures that the directive is complied with but does not rule out the possibility that a branch of, for example, a French firm could provide services here not covered by the directive but covered by the Bill under the authorisation from the supervisory authority. Such a firm would have to satisfy the supervisory authority concerned that it was an appropriate firm to do business in this State and the supervisory authority need not authorise it otherwise.

Amendment No. 5 is a consequential amendment to allow for the possibility that a company incorporated in a member state of the EU might have an authorisation from a supervisory authority here where this is not precluded by the investment services directive.

I seem to remember a similar situation with the Stock Exchange Bill and perhaps the Minister will correct me if I am wrong in this regard. Is his amendment not superfluous in the sense that if a company's head office is located in an EU member state it is subject to that state's regulatory authority which also has a relationship with our regulatory authority? Is it not true that we have recourse to that state's regulatory authority in dealing with any matters that might arise?

The company might provide services that are not covered by the directive and the purpose of the amendment is to include those.

We have recourse to that regulatory authority in regard to a company operating from its headquarters in another member state. That relationship still stands and if we are unable to deal with the problem here, is it not within our remit to report it to the regulatory authority in the other state?

Yes, if it is in relation to a matter that comes within the ambit of the regulatory authority. However, if the company is operating outside the non-EU directive terms, there is then a loophole which this amendment will close.

Progress reported; Committee to sit again.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.